Feds fail to pun­ish stores that aid food stamp cheats

The Washington Times Weekly - - Politics - BY PHILLIP SWARTS

Fail­ure to po­lice the store own­ers who served as en­ablers for food stamp fraud cost the gov­ern­ment at least $12 mil­lion on top of the money lost to scams, ac­cord­ing to investigators look­ing into prob­lems in the fed­eral Sup­ple­men­tal Nu­tri­tion As­sis­tance Pro­gram.

The Agri­cul­ture Depart­ment’s Food and Nu­tri­tion Ser­vice of­fice lacks “clear pro­ce­dures and guid­ance to carry out key over­sight and en­force­ment ac­tiv­i­ties re­lated to re­tailer fraud,” said a re­port from the agency’s in­ter­nal watch­dog, the in­spec­tor gen­eral.

“As a re­sult, the in­tegrity of [the food stamp pro­gram] is at risk be­cause FNS does not pro­vide suf­fi­cient de­ter­rents to traf­fick­ing,” in­spec­tors said.

For fail­ing to clamp down on a black-mar­ket trade that wastes tax­payer money, the Food and Nu­tri­tion Ser­vice wins the first Golden Ham­mer of the year, a weekly award handed out by The Wash­ing­ton Times to high­light ex­am­ples of fis­cal fraud, waste and abuse.

The in­spec­tor gen­eral’s investigators said $5.3 mil­lion worth of waste was be­cause busi­nesses that had been per­ma­nently dis­qual­i­fied from the pro­gram were still able to redeem SNAP ben­e­fits. The other $6.7 mil­lion was from un­col­lected fees: If a dis­qual­i­fied store owner tries to sell the busi­ness, the gov­ern­ment is sup­posed to be paid a fee for time re­main­ing on the sus­pen­sion.

Investigators also found 51 cases in which store own­ers sim­ply trans­ferred con­trol of their busi­nesses to close fam­ily or friends in an at­tempt to cir­cum­vent their dis­qual­i­fi­ca­tions, and the Food and Nu­tri­tion Ser­vice never caught the switch. Two brothers in Penn­syl­va­nia kept trans­fer­ring con­trol of their com­pany to each other ev­ery time one of them was dis­qual­i­fied.

Fraud in SNAP rose last year, though with some es­ti­mates plac­ing the amount at 1 per­cent of all fund­ing, de­fend­ers say, the pro­gram re­mains one of the most ef­fi­cient in all of gov­ern­ment.

But the Agri­cul­ture Depart­ment es­ti­mates that it dis­trib­uted more than $75 bil­lion in SNAP ben­e­fits in 2012 to low-in­come house­holds, and a num­ber that large means even mi­nor ex­am­ples of fraud or abuse can mean mil­lions of dol­lars slip through the cracks.

Investigators think the Food and Nu­tri­tion Ser­vice missed out on $6.7 mil­lion in penal­ties it should have col­lected and was bilked a fur­ther $5.3 mil­lion by stores that should have been in­el­i­gi­ble for SNAP yet were al­lowed to par­tic­i­pate.

Food and Nu­tri­tion Ser­vice of­fi­cials said the in­spec­tor gen­eral was con­duct­ing its eval­u­a­tion while the agency was re­or­ga­niz­ing the over­sight of SNAP re­tail­ers, and con­tended that sig­nif­i­cant im­prove­ments have been made.

“FNS is dis­ap­pointed that the au­dit’s broad find­ings did not make clear the sub­stan­tive work and change that was oc­cur­ring and ac­com­plished by the agency dur­ing the au­dit pe­riod,” a re­sponse from the of­fice said.

USDA and the in­spec­tor gen­eral dis­agreed over some of the rules sur­round­ing the pro­gram. Investigators found 586 store own­ers who were al­lowed to con­tinue par­tic­i­pat­ing in SNAP at new lo­ca­tions af­ter their other stores were “per­ma­nently dis­qual­i­fied.”

The Food and Nu­tri­tion Ser­vice ar­gued that this was not a mis­take and that store own­ers are al­lowed to par­tic­i­pate in SNAP af­ter il­licit ac­tiv­ity so long as they were not di­rectly in­volved.

But part of the prob­lem investigators found was that the Food and Nu­tri­tion Ser­vice wasn’t per­form­ing ba­sic over­sight such as crim­i­nal back­ground checks be­fore al­low­ing re­tail­ers to par­tic­i­pate in SNAP.

There is a bur­geon­ing black-mar­ket trade for SNAP ben­e­fits, pop­u­larly known as food stamps, though pa­per has made way for elec­tronic trans­ac­tions. The most com­mon kind of fraud is from in­di­vid­u­als buy­ing and sell­ing ben­e­fits, with stores act­ing as in­ter­me­di­aries and skim­ming off prof­its.

Investigators said the Food and Nu­tri­tion Ser­vice has been im­prov­ing its over­sight of stores par­tic­i­pat­ing in SNAP, in­clud­ing re­quir­ing high-risk busi­nesses to reap­ply for the pro­gram an­nu­ally in­stead of once ev­ery five years as is nor­mal.

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